INTERVIEW: World Bank’s IFC Eyes Egypt’s IPO Companies For Minority Shares Purchase, Says VP

Egypt is an important country for the International Finance Corporation (IFC), a financial arm of the World Bank Group (WBG), with a huge potential that needs to be tapped, IFC Vice President for Africa Sérgio Pimenta said.

Ahram Online interviewed Pimenta on the sidelines of his two-day visit to Egypt, which concluded.

He highlighted the IFC’s commitment to support Egypt’s economic development goals through expanding the private sector’s participation in the economy.

In Egypt, Pimenta met with a number of key government officials, including the ministers of international cooperation and planning and economic development, as well as with donors, and private sector and other development partners.

“It is important to come and spend time with partners here, our clients, the government of Egypt, the authorities in general, and the development partners and see how we can continue further our activities in Egypt,” Pimenta told Ahram Online.

The IFC has a growing portfolio of nearly $1.5 billion in investment projects, and $32 million in advisory programmes in Egypt which support the private sector in key areas, such as access to finance, fintech, climate finance, manufacturing, infrastructure and renewable energy, healthcare, and gender.

The WBG announced the launch of its strategy for Egypt (2023-2027) during which time the IFC will provide the country with $2 billion.

“Egypt is a country that still has some development challenges, where we have been very active and can do more.

So, that is the purpose of my visit. I was very happy that we had the opportunity to sign a number of agreements during the visit,” Pimenta said.

He that the IFC has signed an investment in the Mediterranean Capital Partners Fund.

Accordingly, it provides $25 million in investment in the fund and $20 million as co-investment envelop.

“It is an interesting opportunity because this fund focuses on the medium-sized companies, the ones that are growing. This type of companies creates more employment.

We prioritise the companies that are owned by women or managed by them and have plans to improve woman participation in the workforce and economic activity. So, the theme of supporting Egyptian women is one of the main themes of our strategy in Egypt.

This fund has operations in Egypt and in some countries in North and West Africa, but we chose Egypt to sign this agreement,” Pimenta explained.

The IFC has also signed an agreement on advisory services to support the Commercial International Bank (CIB), one of the corporation’s clients, he added.

“We have helped the CIB a few years ago to launch its first green bond in Egypt.

The technical assistance that we will introduce to the CIB under the new agreement will focus on climate risk management, which is helping the bank identify climate risk with its clients; how they can be impacted by climate issues and what kind of adaptation measures could be taken.

I think it is really a spot-on when it comes to helping Egyptian companies weather the impacts of climate change,” Pimenta noted.

“Gender and climate are some of the key themes for what we are doing in Egypt and I am really excited to have these two signs during this visit,” Pimenta pointed out.

Expanding the IFC’s role in supporting the private sector in Egypt and how he perceives the recent actions the government has adopted to support it, Pimenta told Ahram Online that the IFC is the private sector arm of the WBG; so it focuses on private sector development through financing and advising private sector companies.

“But, in order to improve the agenda of the private sector development, we also work with the government, [providing] advisory work on private sector development issues.

When it comes to the State Ownership Policy [Document] Egypt has launched recently, for instance, [this is] an area [in which] we can actually help the government and support it to attract more private investments,” Pimenta said.

The State Ownership Policy Document is an Egyptian effort to raise the private sector’s share in the country’s economic activity to 65 percent over three years, up from 30 percent.

On the 32 state-owned companies Egypt intends to list in its stock exchange or to be offered to strategic investors, Pimenta noted that the IFC eyes investment in some of them by purchasing minority shares, especially those that operate in financial inclusion, energy, and renewables.

“Meanwhile, we have a team that do transaction advisory for the government to help structure the listing transaction, which means preparing the legal and technical framework for these companies so that the government can ask the private sector companies to apply for taking a stake in the offered companies.

We look to their governance, financial model, structure, and technical model before listing.

We give advice on that, and that is a part of our work in this area,” he added.

The 32 state-owned companies is a significant number of companies.

They are quite a wide variety of sectors. They are the right choices to be offered for the private sector,” Pimenta stressed.

On the volatility all capital and stock markets have been witnessing and how this could be a serious challenge for Egypt’s IPO programme, Pimenta said that this is a challenging time for everyone everywhere.

“This type of investment, particularly taking shares in a company, any investor will not come with a short-term vision, but with a long-term one. Becoming a shareholder in a company doesn’t mean that you will invest money today and pull it out in three weeks.

I mean that you invest and you are going to stay for a number of years, sometimes for decades, to make profits.

The investor looks at these companies in the long term as an opportunity; the long-term prospect,” Pimenta explained.

Egypt has many potentials investors can tap through investing in these companies, he noted.

“Egypt is a large country with a large young population with a good level of education.

So we have a strong labour force with tremendous advantages, like the geographic location and access to natural resources.

There are lots of potentials for Egypt and this is what investors bet on.

The government has put its IPO programme in a long-term vision. Bringing the private sector to these companies will help them grow.

You bring not just capitals, but also expertise and human resources.”